Dendreon’s full year 2012 adjusted loss per share of $1.87 was narrower than the Zacks Consensus Estimate of a loss of $2.89 and the year-ago loss of $2.54. Revenues for the year 2012 were down 4.7% year over year to $325.5 million. Revenues were however ahead of the Zacks Consensus Estimate of $322 million.

Quarter in Details

Total revenue in the reported quarter declined 57.7% year over year to $85.5 million. The decline was attributable to the massive reduction in royalty revenues in the final quarter of 2012. Dendreon sold its ownership in a royalty stream related to Merck & Co. Inc.’s (MRK) sales of Victrelis for $125 million in the fourth quarter of 2011.

However, revenues in the reported quarter benefited from a rise in Provenge sales. Revenues were above the Zacks Consensus Estimate of $82 million.

Dendreon’s sole marketed product is Provenge (sipuleucel-T), a therapeutic vaccine for treating advanced prostate cancer, which was launched in the US in May 2010.

Dendreon reported net product revenues of $85.5 million, up 11% from the comparable quarter of 2011. Product revenues were up 9.6% sequentially.

Research & development (R&D) expenses were $19 million, up 1.5%. Selling, general & administrative (SG&A) expenses for the fourth quarter decreased 3.4% to $73.5 million.

Restructuring Initiatives

We note that in July last year the company initiated a restructuring plan. The company expects to reap the results of these initiatives from the first half of 2013 and anticipates full benefits to be realized in the third quarter of 2013.

In Dec 2012, Dendreon sold its immunotherapy manufacturing facility (IMF), based in Morris Plains, New Jersey, for $43 million in cash. The company expects to reduce its cost of goods sold by 50% at the beginning of the third quarter of this year. The company also expects a significant decrease in total expenses as the restructuring benefits will come into effect.

Provenge Update

Management noted an improvement in the reimbursement environment. The physicians are more comfortable prescribing Provenge, as the average time to payment for physicians remains less than 30 days.

The company managed to add 61 net new accounts during the reported quarter taking the total of infusing accounts to 802 since its launch.

Currently approved prostate cancer treatments include Johnson & Johnson’s (JNJ) Zytiga, which has been putting up an impressive performance. Moreover, the prostate cancer market saw a new entrant in Aug 2012 in the form of Medivation’s (MDVN) Xtandi (enzalutamide).

Pipeline Update

We remind investors that Dendreon is currently conducting several phase III and phase II clinical trials in the advanced prostate cancer area. Dendreon also completed treatment of the first patient in an open-label study of Provenge in the EU. The company expects a decision in mid-2013.

Our Take

The successful commercialization of Provenge is crucial for the financial performance of Dendreon as it can drive the company to profitability. We prefer to remain on the sidelines until we see meaningful improvement in Provenge sales. We also remain concerned about Dendreon’s high dependence on Provenge for long-term growth.